African News

Sierra Leone: The Eco to Replace the Leone Next Year

18 April 2014 at 21:17 | 2024 views

By Mekki Elmograbi, Khartoum, Sudan.

Starting from May 2014, citizens from the five countries of East Africa Community – EAC; Kenya, Uganda, Rwanda, Burundi and Tanzania will be able to use their national currencies in the area of EAC. Banks and agencies will offer to the public the service of digital cross-border cash transactions in real time for all local currencies of EAC. A citizen from Uganda can buy a car from Tanzania using Rwandese francs, taking his fuel from an oil station in Burundi after his daughter sends to him an amount of the Ugandan shillings from an agency just close to his home or his village. It seems that the five currencies will become one.

Another similar development, starting from January 2015, six countries from West Africa: Gambia, Ghana, Liberia, Nigeria, Sierra Leone, and Guinea, will launch their common currency "the Eco", an action that will unite the West African Economic and Monetary Union, forming a single West African Monetary Zone - WAMZ. The six countries have already formed the WAMZ and set the schedule of launching the "Eco".

During the past two decades, the South African Rand became the currency of the Common Monetary Area which contains South Africa, Swaziland and Lesotho. Although Namibia withdrew from this union, the Rand is still legal currency for local transactions there. Also, the Rand is a legal and local currency in Zimbabwe and is the best choice for traders and tourists in the whole bloc of SADC which is "the Southern African Development Community".

Still we have more; the two CFAs in West and Central Africa have equal value are are covering 14 countries. The West African CFA franc is the currency of eight countries: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. These eight countries have a combined population of 105 million people.

The acronym CFA stands for Communauté Financière d’Afrique "Financial Community of Africa". The currency is issued from Dakar - Senegal by the BCEAO "Banque Centrale des États de l’Afrique de l’Ouest - Central Bank of West African States".

The Central African CFA franc is the currency of six other countries in Central Africa: Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon. The six countries have a combined population of 45 million.

CFA stands for Coopération financière en Afrique centrale "Financial Cooperation in Central Africa". It is issued from Yaoundé - Cameroon by the BEAC "Banque des États de l’Afrique Centrale - Bank of Central African States".

That means, in January 2015, more than 30 African countries will be united under only five payment systems.

The two CFAs of West and Central Africa are actually covering 150 million population of 14 countries, the "Eco" as a common currency will cover next year six countries including Nigeria with nearly 175 million population, a number that gave Nigeria the name "the Giant of Africa", because it is the most populous country in Africa and the seventh most populous country in the world. The other Eco’s countries are Gambia, Ghana, Liberia, Sierra Leone, and Guinea; their populations respectively (in millions) are almost; 2, 26, 5, 6 and 1.7. That means, Eco covers a population of 215 Million a number that is equal to the population of UK, France and Germany.

What is the real basis of these achievements? Agreements, Pan African conferences and joint plans and strategies could bring African countries together to establish their united monetory systems but sometimes no need for "a lot of written documents and literature"; the strength of the Rand comes from the strength of SA economy. The economy of South Africa is either the first African economy or the second largest in Africa behind Nigeria but, for sure, South Africa has a comparative advantage in the production of agriculture, mining and manufacturing products relating to these sectors. The diversified economy of SA includes also fisheries, cars and trucks manufacturing and assembly, telecommunication, energy, financial and banking services, real estate, tourism, shipping services and wholesale and retail trade.

East Africa is moving towards the common currency slowly but firmly. The "Seamless Pay System" comes through the recently launched East African Community Project on Payment and Settlement Systems Integration - PSSIP" and will gradually bridge member states’ transaction gaps towards the proposed EAC’s common currency.

PSSIP connects the five Central Banks in Kenya, Rwanda, Uganda, Tanzania and Burundi through special technology and digital network that facilitate seamless and real time transactions.

The first step of EAC Financial Sector Development was the initiation of the East African Payment System – EAPS which enabled EAC’s citizens to use the system of successful mobile cash transfers across the five countries, then the project came as the second step that will be followed by other steps and phases.

The Africa’s Development Bank - AfDB representative in the launching festival of PSSIP in Arusha – Tanzania supported the East African Community in the launching of the project stating that it the best way of initiating convergence of the markets in the bloc.

The PSSIP of Eastern Africa, the Rand in Southern Africa, CFA of West Africa and CFA of Central Africa and the coming ECO of West Africa, these five systems will shape the present and the future of Africa.

Photo: A five thousand Leones bank note. It may disappear next year.